Martin North – Page 24 – Digital Finance Analytics (DFA) Blog

Let’s Play Some More Numberwang!

The seasonally adjusted unemployment rate fell by 0.1 percentage point to 4.0 per cent in May, according to data released today by the Australian Bureau of Statistics (ABS).

With employment rising by around 40,000 people and the number of unemployed falling by 9,000 people, the unemployment rate fell to 4.0 per cent.

In April we saw more unemployed people than usual waiting to start work. Some of the fall in unemployment and rise in employment in May reflects these people starting or returning to their jobs.

While the total number of unemployed people fell by 9,000 in May, this followed a 33,000 increase in April. Unemployment was around 24,000 people more than in March, an average increase of around 12,000 people each month.

“There are now almost 600,000 unemployed people, however, that is still nearly 110,000 fewer people than in March 2020, just before the pandemic.

As a result of the increase in employment and the fall in unemployment, the seasonally adjusted employment-to-population ratio remained at 64.1 per cent and the participation rate remained at 66.8 per cent.

The latest net overseas migration figures showed that Australia’s NOM was 178,500 in Q3 and 129,400 in Q4, totalling 307,900 for the half. This leaves only 87,100 worth of NOM over the first half of this year to meet the federal budget’s 395,000 NOM target for 2023-24.

Given that net permanent and long-term arrivals have remained hot so far in 2024, NOM is once again going to blow way past the budget’s forecast.

http://www.martinnorth.com/

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The Fed’s “High For Longer” Ripple Effect

Wednesday was it turned out, a game in two halves, with a slightly better than expected CPI read in the morning, before the Fed’s no change decision later, but impacted by a more hawkish stance in the subsequent press conference. Risk-on assets had rallied after the CPI report showed the US core consumer price index fell to the lowest in more than three years. But later, the Federal Reserve penciled in just one quarter point interest-rate cut this year, down from three seen in March.

The CPI core goods inflation was in negative territory, but the news was not all as good. Remember that to account for the ongoing questions over measuring shelter prices, Chair Jerome Powell and his colleagues chose to focus on the so-called supercore of services excluding housing, a measure particularly influenced by wages. The good news is that both indexes fell last month — a bit. The bad news is that they’re still far too high for comfort and continue to make it hard to cut rates.

And The FED decided to hold rates, but played the data dependent, higher for longer card, again.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Housing Market Sheep And Goats (Which Are You?)

Data from my surveys, as discussed this past week, along with other market data shows we have a very divided housing market, with on one side of the ledger many households under significant pressure and begin forced to sell up, while watching their property values slide, while on the other side property investors are still piling in competing with owner occupied buyers, especially at the lower end of the market and bidding prices higher. Actually of course there are many micro markets across the country, and so any headline “data” on rises or falls mask important differences. Housing isn’t just the great Australian barbecue-stopper. It’s our greatest pain point, too. All this only days after Australia’s GDP figures grew at the lowest rate in three decades, excluding the COVID-19 pandemic, and as traders push out rate cut expectations well into next year.

So today I will be looking at the latest signals from the data relating to mortgage prisoners, forced sales, credit growth and investor activity, to provide context for the misleading headlines we see on the property portals.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

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Markets Discombobulated By Rate Cuts And Mixed Rear View Mirror Data, But Still Bets On AI Growth!

In this week’s market review, as usual we will start in the US, cross to Europe, then Asia, and end in Australia, and in passing we cover commodities and crypto.

I have been highlighting how the data driven approach by Central Banks is a problem, because as new data lands, markets try to respond, making swings in sentiment a core feature of every day.

On Wednesday we got a rate cut from the Bank of Canada, who became the first major central bank among the Group of Seven countries to cut interest rates by a quarter of a percentage point to 4.75 per cent, with governor Tiff Macklem saying if inflation continues to ease, and our confidence that inflation is headed sustainably to the 2 per cent target continues to increase, it is reasonable to expect further cuts to our policy interest rate. Inflation in Canada has slowed this year to hit a three-year low of 2.7 per cent in April. While inflation has stayed below 3 per cent for four straight months, it is still above the central bank’s 2 per cent target.

The BoC joins Sweden’s Riksbank and the Swiss National Bank in bringing down rates and more central banks are weighing rate cuts.

And on Thursday the European Central Bank made a widely expected decision to cut its deposit rate from a record 4% to 3.75% even though inflation remains above its 2 per cent target and recently ticked up. So, the ECB was prepared to cut despite inflation clearly remaining sticky, despite persistent wage pressures and despite some signs the European economy might be improving.

Not only is it one of the very few times that the ECB makes a turn on monetary policy before the Fed, it is also the first time the ECB starts cutting rates after a tightening cycle without facing a recession or crisis. But what’s less clear is what Lagarde does next. Having delivered the historic first cut, she was very reluctant to give many clues on when the next one would be. Watch the data, she said.

And in fact, global stocks pulled back from an all-time high on Friday after surprisingly strong U.S. monthly jobs data dimmed hopes that the Federal Reserve would soon follow euro zone and Canadian interest rate cuts, causing Treasury yields to shoot higher.

So the big question is, with the Bank of Canada cutting on Wednesday night, and Lagarde going on Thursday night, does this give the RBA any more room to deliver the rate cut many Australian households and investors crave? The short answer is no!

The RBA is expected to be among the last central banks to cut rates because the Australian inflation pace is above most major economies. At 3.6 per cent, CPI remains well above the RBA’s 2.5 per cent target and a reason why money markets are only fully priced for an easing in one year’s time.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/